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SAN FRANCISCO--(BUSINESS WIRE)--
Dolby Laboratories, Inc. (NYSE:DLB) today announced the Company's
financial results for the first quarter (Q1) of fiscal year 2017. For
the first quarter, Dolby reported total revenue of $266.3 million,
compared to $240.8 million for the first quarter of fiscal year 2016.

First quarter GAAP net income was $53.4 million, or $0.51 per diluted
share, compared to $30.9 million, or $0.30 per diluted share, for the
first quarter of fiscal 2016. On a non-GAAP basis, first quarter net
income was $68.7 million, or $0.66 per diluted share, compared to $48.6
million, or $0.48 per diluted share, for the first quarter of fiscal
2016. Dolby's non-GAAP measures are described and reconciled to the
corresponding GAAP measures at the end of this release.

"We had a strong first quarter and continue to make progress with Dolby
Vision, Dolby Cinema, and Dolby Atmos," said Kevin Yeaman, President and
CEO, Dolby Laboratories. "We announced our first Dolby Vision TV with
Sony, and our first combined Dolby Vision and Dolby Atmos TV with LG. We
also opened our 70th Dolby Cinema location."

Dividend

Today, Dolby announced a cash dividend of $0.14 per share of Class A and
Class B common stock, payable on February 15, 2017, to stockholders of
record as of the close of business on February 6, 2017.

Stock Repurchase Program

Today, Dolby also announced that its Board of Directors has approved
increasing the size of its stock repurchase program by $200 million,
bringing the amount available for future repurchases of the Company's
Class A Common Stock to approximately $227 million. Stock repurchases
under this program may be made through open market transactions,
negotiated purchases, or otherwise, at times and in such amounts as the
Company considers appropriate.

Financial Outlook

Q2 2017

Dolby estimates that total revenue for the second quarter (Q2) of fiscal
2017 will range from $265 million to $280 million. Gross margin
percentages are projected to range between 88 percent and 89 percent on
a GAAP basis, and between 89 percent and 90 percent on a non-GAAP basis.

Dolby anticipates that operating expenses will be between $177 million
and $181 million on a GAAP basis, and between $158 million and $162
million on a non-GAAP basis.

Dolby estimates that diluted earnings per share will be between $0.43
and $0.49 on a GAAP basis, and between $0.58 and $0.64 on a non-GAAP
basis.

Dolby estimates that its fiscal Q2 2017 effective tax rate will be
between 24 percent and 25 percent on both a GAAP and non-GAAP basis.

Fiscal Year 2017

Dolby anticipates that total revenue will range from $1.06 billion to
$1.10 billion.

Dolby anticipates that operating expenses will range from $700 million
to $710 million on a GAAP basis, and from $625 million to $635 million
on a non-GAAP basis.

Conference Call Information

Members of Dolby management will lead a conference call open to all
interested parties to discuss Q1 fiscal 2017 financial results for Dolby
Laboratories at 2:00 p.m. PT (5:00 p.m. ET) on Wednesday, January 25,
2017. Access to the teleconference will be available over the Internet
from http://investor.dolby.com/events.cfm
or by dialing 1-877-718-5104. International callers can access the
conference call at 1-719-325-4895.

A replay of the call will be available from 5:00 p.m. PT (8:00 p.m. ET)
on Wednesday, January 25, 2017, until 8:59 p.m. PT (11:59 p.m. ET) on
Wednesday, February 1, 2017, by dialing 1-844-512-2921 (international
callers can access the replay by dialing 1-412-317-6671) and entering
the confirmation code 5454615. An archived version of the teleconference
will also be available on the Dolby Laboratories website, http://investor.dolby.com/events.cfm.

Non-GAAP Financial Information

To supplement Dolby's financial statements presented on a GAAP basis,
Dolby provides certain non-GAAP financial measures to provide investors
with an additional tool to evaluate Dolby's operating results in a
manner that focuses on what Dolby's management believes to be its
ongoing business operations. Specifically, we exclude the following as
adjustments from one or more of our non-GAAP financial measures:

Stock-based compensation expense. Stock-based compensation,
unlike cash-based compensation, utilizes subjective and complex
assumptions in the methodologies used to value the various stock-based
award types that we grant. These assumptions may differ from those used
by other companies. To facilitate more meaningful comparisons between
our underlying operating results and those of other companies, we
exclude stock-based compensation expense.

Expense associated with dividend equivalents paid on restricted stock
units. In connection with a special dividend declared in the first
quarter of fiscal 2013, we modified restricted stock units (RSUs) that
were unvested at that time to preserve their pre-cash dividend economic
value. The special dividend was a discrete and infrequent event that is
not representative of our normal operating activities; therefore, we
exclude the compensation cost related to the dividend equivalents to
provide a more accurate view of our underlying operating results.

Amortization of acquisition-related intangibles. We amortize
intangible assets acquired in connection with acquisitions. These
intangible assets consist of patents and technology, customer
relationships, and other intangibles. We record amortization charges
relating to these intangible assets in our GAAP financial statements,
and we view these charges as items arising from pre-acquisition
activities that are determined by the timing and valuation of our
acquisitions. As these amortization charges do not directly correlate to
our operations during any particular period, and often remain unchanged
between reporting periods, we exclude these charges to facilitate an
evaluation of our current operating results and comparisons to our past
operating performance.

Restructuring charges. Restructuring charges are costs associated
with a formal restructuring plan and primarily relate to employee
severance benefits and asset impairments. We exclude restructuring
costs, including any adjustments to charges recorded in prior periods,
as we believe that these costs are not representative of our normal
operating activities and therefore, excluding these amounts enables a
more effective comparison to our past operating performance.

Income tax adjustments. We believe that excluding the income tax
effect of the aforementioned non-GAAP adjustments provides a more
accurate view of our underlying operating results to management and
investors.

Using the aforementioned adjustments, Dolby provides various non-GAAP
financial measures including, but not limited to: non-GAAP net income,
non-GAAP diluted earnings per share, non-GAAP gross margin, non-GAAP
operating expenses, non-GAAP operating margin, and non-GAAP effective
tax rate. Dolby's management believes it is useful for itself and
investors to review both GAAP and non-GAAP measures in order to assess
the performance of Dolby's business. Dolby's management does not itself,
nor does it suggest that investors should, consider non-GAAP financial
measures in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. Whenever Dolby uses
non-GAAP financial measures, it provides a reconciliation of the
non-GAAP financial measures to the most closely applicable GAAP
financial measures. Investors are encouraged to review the related GAAP
financial measures and the reconciliation of these non-GAAP financial
measures to their most directly comparable GAAP financial measures as
detailed above. Investors are also encouraged to review Dolby's GAAP
financial statements as reported in its US Securities and Exchange
Commission (SEC) filings. A reconciliation between GAAP and non-GAAP
financial measures is provided at the end of this press release and on
the Dolby Laboratories investor relations website, http://investor.dolby.com.

Forward-Looking Statements

Certain statements in this press release, including, but not limited to,
statements relating to Dolby's expected financial results for Q2 2017
and fiscal 2017, our ability to advance our long-term objectives, and
future dividend payments and stock repurchases are "forward-looking
statements" that are subject to risks and uncertainties. These
forward-looking statements are based on management's current
expectations, and as a result of certain risks and uncertainties, actual
results may differ materially from those projected. The following
important factors, without limitation, could cause actual results to
differ materially from those in the forward-looking statements: risks
associated with trends in the markets in which Dolby operates, including
the broadcast, PC, Consumer Electronics, Cinema and other markets; the
loss of, or reduction in sales by, a key customer or licensee; pricing
pressures; risks associated with the rate at which OEMs include optical
disc playback in Windows® devices and the rate of consumer
adoption of Windows operating systems; risks that a shift from
disc-based media to online media content could result in fewer devices
with Dolby® technologies; risks associated with the effects
of macroeconomic conditions, including trends in consumer spending;
risks relating to the expiration of patents; the timing of Dolby's
receipt of royalty reports and payments from its licensees, including
back payments; timing of revenue recognition under licensing agreements
and other contractual arrangements; Dolby's ability to develop,
maintain, and strengthen relationships with industry participants;
Dolby's ability to develop and deliver innovative technologies in
response to new and growing markets; competitive risks; risks associated
with conducting business in China and other countries that have
historically limited recognition and enforcement of intellectual
property and contractual rights; risks associated with the health of the
motion picture industry generally; Dolby's ability to increase its
revenue streams and expand its business generally, and to expand its
business beyond audio technologies to other technologies; risks
associated with acquiring and successfully integrating businesses or
technologies; and other risks detailed in Dolby's SEC filings and
reports, including the risks identified under the section captioned
"Risk Factors" in its most recent annual report on Form 10-K. Dolby
disclaims any obligation to update information contained in these
forward-looking statements whether as a result of new information,
future events, or otherwise.

About Dolby Laboratories

Dolby Laboratories (NYSE:DLB) creates audio, video, and voice
technologies that transform entertainment and communications in mobile
devices, at the cinema, at home, and at work. For more than 50 years,
sight and sound experiences have become more vibrant, clear, and
powerful in Dolby. For more information, please visit www.dolby.com.

Dolby, Dolby Atmos, and the double-D symbol are registered trademarks of
Dolby Laboratories. Dolby Cinema and Dolby Vision are trademarks of
Dolby Laboratories. All other trademarks remain the property of their
respective owners. DLB-F

DOLBY LABORATORIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Fiscal Quarter Ended

December 30, 2016

January 1, 2016

Revenue:

(unaudited)

(unaudited)

Licensing

$

232,699

$

211,129

Products

28,211

24,809

Services

5,357

4,876

Total revenue

266,267

240,814

Cost of revenue:

Cost of licensing

8,121

6,533

Cost of products

17,720

19,038

Cost of services

4,126

4,195

Total cost of revenue

29,967

29,766

Gross margin

236,300

211,048

Operating expenses:

Research and development

57,518

53,328

Sales and marketing

71,175

74,454

General and administrative

41,540

44,078

Total operating expenses

170,233

171,860

Operating income

66,067

39,188

Other income/expense:

Interest income

1,814

1,297

Interest expense

(26

)

(29

)

Other income/(expense), net

(199

)

(972

)

Total other income

1,589

296

Income before income taxes

67,656

39,484

Provision for income taxes

(14,082

)

(8,473

)

Net income including controlling interest

53,574

31,011

Less: net (income) attributable to controlling interest

(200

)

(110

)

Net income attributable to Dolby Laboratories, Inc.

$

53,374

$

30,901

Net income per share:

Basic

$

0.53

$

0.31

Diluted

$

0.51

$

0.30

Weighted-average shares outstanding:

Basic

101,483

100,734

Diluted

103,876

101,931

DOLBY LABORATORIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

December 30, 2016

September 30, 2016

ASSETS

(unaudited)

Current assets:

Cash and cash equivalents

$

512,838

$

516,112

Restricted cash

5,075

3,645

Short-term investments

164,818

121,629

Accounts receivable

81,393

75,688

Inventories

14,773

16,354

Prepaid expenses and other current assets

32,119

26,302

Total current assets

811,016

759,730

Long-term investments

350,360

393,904

Property, plant and equipment, net

459,709

443,656

Intangible assets, net

206,862

215,342

Goodwill

307,121

309,616

Deferred taxes

171,388

166,790

Other non-current assets

24,247

21,068

Total assets

$

2,330,703

$

2,310,106

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

11,541

$

17,544

Accrued liabilities

169,711

169,055

Income taxes payable

1,514

2,304

Deferred revenue

24,405

24,180

Total current liabilities

207,171

213,083

Long-term deferred revenue

34,603

35,366

Other non-current liabilities

88,271

82,922

Total liabilities

330,045

331,371

Stockholders' equity:

Class A common stock

56

57

Class B common stock

44

44

Additional paid-in capital

36,435

42,032

Retained earnings

1,977,478

1,938,320

Accumulated other comprehensive (loss)

(19,679

)

(10,197

)

Total stockholders' equity - Dolby Laboratories, Inc.

1,994,334

1,970,256

Controlling interest

6,324

8,479

Total stockholders' equity

2,000,658

1,978,735

Total liabilities and stockholders' equity

$

2,330,703

$

2,310,106

DOLBY LABORATORIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Fiscal Quarter Ended

December 30, 2016

January 1, 2016

Operating activities:

(unaudited)

(unaudited)

Net income including controlling interest

$

53,574

$

31,011

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

21,810

21,814

Stock-based compensation

17,215

19,380

Amortization of premium on investments

662

1,605

Excess tax benefit from exercise of stock options

(2,962

)

(300

)

Provision for doubtful accounts

67

(322

)

Deferred income taxes

(3,275

)

(10,488

)

Other non-cash items affecting net income

(376

)

445

Changes in operating assets and liabilities:

Accounts receivable

(5,782

)

11,961

Inventories

878

(877

)

Prepaid expenses and other assets

(8,705

)

(3,567

)

Accounts payable and other liabilities

(11,528

)

(14,574

)

Income taxes, net

6,245

5,014

Deferred revenue

(479

)

6,319

Other non-current liabilities

417

(26

)

Net cash provided by operating activities

67,761

67,395

Investing activities:

Purchase of investments

(37,073

)

(85,299

)

Proceeds from sales of investment securities

7,524

121,770

Proceeds from maturities of investment securities

26,902

14,610

Purchases of PP&E

(22,576

)

(24,368

)

Purchase of intangible assets

—

(105,270

)

Change in restricted cash

(1,430

)

(1,395

)

Net cash used in investing activities

(26,653

)

(79,952

)

Financing activities:

Proceeds from issuance of common stock

13,991

9,986

Repurchase of common stock

(25,001

)

(39,449

)

Payment of cash dividend

(14,216

)

(12,114

)

Distribution to controlling interest

(2,094

)

(214

)

Excess tax benefit from exercise of stock options

2,962

300

Shares repurchased for tax withholdings on vesting of restricted
stock

(14,656

)

(9,839

)

Net cash used in financing activities

(39,014

)

(51,330

)

Effect of foreign exchange rate changes on cash and cash equivalents

(5,368

)

(940

)

Net decrease in cash and cash equivalents

(3,274

)

(64,827

)

Cash and cash equivalents at beginning of period

516,112

531,926

Cash and cash equivalents at end of period

$

512,838

$

467,099

GAAP to Non-GAAP Reconciliations(in millions, except
per share data)

The following tables present Dolby's GAAP financial measures
reconciled to the non-GAAP financial measures included in this
release for the first quarter of fiscal 2017 and 2016:

Net income:

Fiscal Quarter Ended

December 30, 2016

January 1, 2016

GAAP net income

$

53.4

$

30.9

Stock-based compensation

17.2

19.4

RSU dividend equivalent

0.2

0.4

Amortization of acquisition-related intangibles

3.8

4.1

Income tax adjustments

(5.9)

(6.2)

Non-GAAP net income

$

68.7

$

48.6

Diluted earnings per share:

Fiscal Quarter Ended

December 30, 2016

January 1, 2016

GAAP diluted earnings per share

$

0.51

$

0.30

Stock-based compensation

0.17

0.19

RSU dividend equivalent

—

0.01

Amortization of acquisition-related intangibles

0.04

0.04

Income tax adjustments

(0.06)

(0.06)

Non-GAAP diluted earnings per share

$

0.66

$

0.48

Shares used in computing diluted earnings per share

104

102

The following tables present a reconciliation between GAAP and
non-GAAP versions of the estimated financial amounts for the second
quarter of fiscal 2017 and fiscal year 2017 included in this release: